Pension error results in £2.7 billion windfall for women retirees

Retired women on the old state pension could be due for a lump sum of an average £13,500 after an error has found that some married women, widows and over-80s have been underpaid for up to two decades.

The Department for Work and Pensions (DWP) estimates that the total cost of repaying the arrears will total £2.7 billion. The DWP is currently in the process of identifying and contacting those who have been underpaid due to the error which occurred after an electronic prompt to consider if an individual’s state pension amount should be increased that requires DWP staff to take further manual action that in some cases did not take place.

Those who were underpaid and who may receive a lump sum payment, along with an increase in their state pension, fall into the following groups:

• People who are married or in a civil partnership who reached State Pension age before 6 April 2016 and may be entitled to a Category BL uplift based on their partner’s National Insurance contributions.
• People who have been widowed and their State Pension was not uplifted to include amounts they are entitled to inherit from their late husband, wife or civil partner.
• People who have not been paid Category D State Pension uplift as they should have been from age 80.

The old state pension, or basic state pension, is the pension that women born before 6 April 1953 and men born before 6 April 1951 are eligible to receive. Under the rules of this type of state pension those not eligible for a basic state pension or not getting the full amount, for example due to not working enough years, may qualify for a ‘top up’ to £80.45 per week through their spouse’s or civil partner’s National Insurance contributions.

Pensioners can get the ‘top up’ if both have reached state pension age and either:

• Their spouse or civil partner reached State Pension age before 6 April 2016 and qualifies for some basic State Pension, even if they have not claimed it.
• Their spouse or civil partner reached State Pension age on or after 6 April 2016 and has at least one qualifying year of National Insurance contributions or credits from before 6 April 2016, even if they do not qualify for any new State Pension or they have not claimed it.

If a pensioner’s spouse or civil partner was born before 6 April 1950, they can only get the ‘top up’ if they’re a woman who is married to either:

• A man.
• A woman who legally changed their gender from male to female during your marriage.

For those who think they may qualify for a ‘top up’ to their state pension should contact the Pension Service.

The DWP has said that it will contact those who have been identified as being underpaid due to the error. As such, those who think they may have been underpaid do not need to take any action.

Those who may fall into the impact groups should be aware that the error did not occur in every case and be wary of any communication reporting to be from the DWP that asks for personal and/or bank details.